Chapter Objectives

1. Product and Service Strategies CHAPTER11 Chapter Objectives Define product and distinguish between goods and services and how they relate to the goods-services continuum. Explain the importance of the service sector in today’s marketplace. List the classifications of consumer goods and services and briefly describe each category. Describe each of the types of business goods and services. Explain how quality is used by marketers as a product strategy. Explain why firms develop lines of related products. Describe the way marketers typically measure product mixes and make product mix decisions. Explain the concept of the product life cycle and identify the different stages. Describe how a firm can extend a product’s life cycle, and explain why certain products may be deleted. 4 7 1 5 8 2 6 3 9

2. • Marketing mix Blending of the four strategy elements—product, distribution, promotion, and price—to fit the needs and preferences of a specific target market. • Marketers develop strategies to sell both tangible goods and intangible services.

3. WHAT IS A PRODUCT? • People buy want satisfaction, not objects. • Product Bundle of physical, service, and symbolic attributes designed to satisfy a customer’s wants and needs. WHAT ARE GOODS AND SERVICES? • Services Intangible tasks that satisfy the needs of consumer and business users. • Goods Tangible products that customers can see, hear, smell, taste, or touch.

4. IMPORTANCE OF THE SERVICE SECTOR • Service sector makes up more than two-thirds of the U.S. economy. • U.S. has maintained a trade surplus in services every year since the 1970. • Homeshoring Hiring workers to do jobs from their homes. • Marketing is growing in importance in the service sector.

5. CLASSIFYING GOODS AND SERVICES FORCONSUMER AND BUSINESS MARKETS • Consumer (B2C) products Product destined for use by ultimate consumers. • Business (B2B) products. Product that contributes directly or indirectly to the out- put of other products for resale; also called industrial or organizational product. • Some products fall into both categories.

6. TYPES OF CONSUMER PRODUCTS Specialty Products Unsought Products Convenience Products Shopping Products

7. CLASSIFYING CONSUMER SERVICES • Marketers rely on five questions to classify services: • What is the nature of the service? • What type of relationship does the service organization have with its customers? • How much flexibility is there for customization and judgment on the part of the service provider? • Do demand and supply for the service fluctuate? • How is the service delivered? APPLYING THE CONSUMER PRODUCTS CLASSIFICATION SYSTEM • Buying behavior and marketing mix choices patterns differ for different product types.

8. TYPES OF BUSINESS PRODUCTS • Categories emphasize product use rather than consumer buying behavior. Installations Business Services MRO Supplies Raw Materials Accessory Equipment Components

9. QUALITY AS A PRODUCT STRATEGY • Total quality management (TQM) Continuous effort to improve products and work processes with the goal of achieving customer satisfaction and world-class performance. WORLDWIDE QUALITY PROGRAMS • Leadership of several large U.S. corporations led to quality revolution of the 1980s. • U.S. Congress established the Malcolm BaldrigeNational Quality Award to recognize excellence in quality management. • ISO 9002 standards implemented by the European Union define international criteria for quality management and assurance. • U.S. member body of ISO is National Institute of Standards and Technology.

10. BENCHMARKING • Purpose is to achieve superior performance that results in a competitive advantage. • Involves three main activities: • Identifying manufacturing or business processes that need improvement. • Comparing internal processes to those of industry leaders. • Implementing changes for quality improvement. QUALITY OF SERVICES • Service encounter—point at which customer and service provider interact, which usually determines the customer’s perception of the quality of service. • Service quality—expected and perceived quality of a service offering.

11. DEVELOPMENT OF PRODUCT LINES • Product line Series of related products offered by one company. DESIRE TO GROW • Growth potential limited if company focuses on a single product. ENHANCING COMPANY’S POSITION IN THE MARKET • Entire lines of products make company more important to consumers and marketing intermediaries. OPTIMAL USE OF COMPANY RESOURCES • Spreading operations costs over a series of product lines reduces the average production and marketing costs of each product.

12. THE PRODUCT MIX • Assortment of product lines and individual product offerings that the company sells. • Product mix width—Number of product lines a firm offers. • Product mix length—Number of different products a firm sells. • Product mix depth—Variations in each product that the firm markets in its mix. PRODUCT MIX DECISIONS • Firms evaluate the effectiveness of the width, length, and depth to make decisions about adding or eliminating products from their offerings. • Line extension—adding individual offerings that appeal to different market segments while remaining closely related to the existing product line.

13. THE PRODUCT LIFE CYCLE • Product life cycle Progression of a product through introduction, growth, maturity, and decline stages. STAGES IN THE PRODUCT LIFE CYCLE Introduction Growth Maturity Decline

14. EXTENDING THE PRODUCT LIFE CYCLE • Product life cycles can be extended indefinitely as a result of marketers’ decisions. INCREASING FREQUENCY OF USE • Convincing current customers to buy a product more frequently boosts total sales even if no new buyers enter the market. INCREASING THE NUMBER OF USERS • Attracting new customers who have not previously used the product.

15. FINDING NEW USES • New applications extend a product’s life cycle. CHANGING PACKAGE SIZES, LABELS, OR PRODUCT QUALITY • Example: Food marketers produce packages designed to appeal to one-person households. • Example: Kraft’s 100-calorie Snack Packs, which package snacks in 100 calorie amounts.

16. PRODUCT DELETION DECISIONS • Marketers prune product lines and eliminate marginal products to preserve limited resources. • Firms may carry poor performing items to carry a complete product line. • Shortages or raw materials can prompt a firm to discontinue production. • Firm may drop products that don’t fit into the direction in which it plans to grow.